Tide International is a subsidiary of Tide Group, focusing on enterprise service business. The company's business is mainly traditional ERM services, focusing on the cloud from 2018. The company has four sectors of business: traditional ERM, cloud business, outsourcing and Internet of things. In 2018, traditional ERM services accounted for 65% of total revenue, while cloud services accounted for 8%. The company has no intention of expanding its existing outsourcing business, and the hardware revenue of the Internet of things business matches the development or steady growth of software services. We expect EPS to be HK $0.23 in 19 years (down 20% year on year), HK $0.24 in 20 years (up 4% year on year), and HK $0.28 EPS in 21 years (up 13% year on year). Based on the segment summation model of cloud business 8x PS and other business 8x PE, we arrive at a target price of HK $5.0m. The share price still has 43% room to rise, and we cover the buy rating for the first time.
More SaaS products will be launched soon. Tide International's cloud deployment has taken shape, although it is much later than Kingdee, but it is still in the industry dividend period of rapid cloud development. For large enterprises, Wave International launched some GS cloud products, which were released in September 2018. In September this year, GS Cloud will launch an all-cloud SaaS module. This product can be combined with offline GS products to form a private cloud, public cloud or hybrid cloud for customer customization needs. In addition to GS cloud, tide international has a joint venture with ODOO to launch the PS cloud, which is designed for small and medium-sized enterprises, in April 2018, and wave holds a 75 per cent stake in the joint venture. For small and micro enterprises, Chaochao also has easy Cloud online products.
Cloud business quality and expansion. Although about 70% of the cloud business in 2018 is private cloud, the company's cloud business is based on the SaaS business model. Except for the implementation fees in GScloud, most of the rest are sustainable annual fee income. The company expects that the total cloud business revenue will reach 50% of the total revenue by 2023, of which about half will come from GS cloud and more than 40% from PS cloud. PS cloud is a big challenge for the company, because the company's traditional business mainly serves large enterprises, with fewer small and medium-sized customers. Challenges are also opportunities. If the development of PS cloud is as expected by the company, it will bring a new world to the development of the company as a whole.
Cover for the first time to give a buy rating. We expect EPS to be HK $0.23 in 19 years (down 20% year on year), HK $0.24 in 20 years (up 4% year on year), and HK $0.28 EPS in 21 years (up 13% year on year). Due to the high investment in the early stage of cloud business development, profits will decline. Based on the segment summation model of cloud business 8x PS and other business 8x PE, we find that the target price is HK $5.0,which is equivalent to 21x 19e PE, 2.5x 19e PB, 21x 20e PE, 2.3x 20e PB. The share price still has 43% room to rise, and we cover the buy rating for the first time.